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Let the equilibrium condition for national income be S(Y) T(Y) = I(Y) Go (S', T', I' > 0; S' T' > I') where S, Y, T, I, and G stand for saving, national income, taxes, investment, and government expenditure, respectively. All derivatives are continuous. (a) Interpret the economic meanings of the derivatives S', T', and I'. (b) Check whether the conditions of the implicit-function theorem are satisfied. If so, write the equilibrium identity. (c) Find (dY/dGo) and discuss its economic implications.
Sagot :
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